In power-law environments, most observations are small events which lull you into false sense of security, but occasionally huge events occur; insurance addresses this by protecting against large rare events, but insurance companies face difficult job of pricing because they must charge enough to cover inevitable catastrophic outliers.
causalpending
Evidence Quote
“this can lull you into a false sense of security, you think you understand how things are going... insurance companies face the particularly difficult job because they have to be able to say how much to charge so that they have enough money to pay out when the big bad thing comes along”
Created: 8/11/2026, 6:45:34 AM
My Notes
Loading notes...